End of the World

by D Thomas Jewett

  “You're not in any of 'em. Are you?”

  “No – not me. But my folks are into a couple of 'em. They've been listening to their adviser telling them '... you should stay in for the long haul and not sell them off ...,' she mimicked, her voice dripping with sarcasm.”

  Lori sighed. “They never listen to me anyway.”

  * * *

  DJIA Open: 11,421.99[17]

  “Hey Lori! Did you get the news yesterday?” Tim shouted above the din of yelling and stomping across the raised floor.

  “What news?” Lori shouted back.

  “The news about Lehman.”

  “No. What did it say?”

  “Word is out that Lehman is looking for a buyer.”

  “You’re kidding me!”

  “Nope! It seems that Bank of America was gonna buy 'em; but they pulled out when they learned Lehman had so many toxic sub prime mortgages. They think Lehman has a negative net worth.”

  Lori let go a soft whistle. “Holy shit!”

  Tim moved closer to her desk and continued. “I heard something about them trying to put together a bailout for Lehman. I think they're supposed to meet today.”

  “Holy cow!” She paused, frowning. “Any other news?”

  “Yeah. Bank of America has announced they're buying Merrill Lynch for $50 Billion.”

  “Oh man!” Lori's eyes widened. “My folks are in that too.” She paused. “What price is it going for?”

  “I don't know. They didn't say.”

  Lori looked crestfallen. And then she looked up at Tim and grinned as she said, “Well at least Merrill’s worth buying! Any more news?”

  “Yeah.”

  “You can't be serious! What the hell is going on?”

  “Lori, I don't know what's happening. I don't think anyone knows.” Tim sighed. “This is way bigger than coincidence. I just don't know what to make of it.”

  Their eyes met, and Lori breathed slowly as she began to connect with herself. Then she took a deep breath and asked, “Okay – what's the other news?”

  “WaMu is seeking a buyer; and Fitch[18] downgraded AIG[19].”

  “Damn! You can't be serious!”

  “I am serious, Lori. The shit's hitting the fan.”

  “Oh my!”

  “What?” Tim asked.

  “My parents hold about $120K of WaMu[20] – my Dad used to work there.”

  “What’s the price now?”

  Lori turned and checked her computer. “Two bucks per share.” She turned and looked into Tim's eyes. “I think they've lost all of it in WaMu.”

  “I'm so sorry,” Tim said. His voice was sad.

  “Anything else?” Lori's voice was dripping with sarcasm.

  “No. I think that's all the news for the weekend.”

  “Thank God!”

  * * * * *

  It was 9:55 am. A fine mist was falling when the limousine pulled up in front of the New York Fed building. Treasury Secretary Peter Simmons and his aide stepped out of the car and made their way quickly through the mist to the front entrance of the building. They entered the building and went directly to the elevators, where they rode a car to the 10th floor. Emerging from the elevator, they strode down a corridor, passing by several doorways adorned with intricate walnut trim and moulding. The Secretary lived with a painful kneecap problem that made it difficult to climb stairs. So he always appreciated that the New York Fed conference rooms were located off an elevator.

  They came upon double doors, with muffled voices emanating from inside the room. The sign to the right of the door read, Northwest Conference Room. He turned the knob and they entered into a large room with a tall ceiling, where they were greeted by a group of middle-age men – many of whom were old friends. They were uniformly attired in tailored suits and silk neckties.

  Most of the men were talking; some telling stories about the current crisis, and others talking about past crises or market action. Smoking was, of course, prohibited in many New York City buildings. But this was the domain of bankers, and the men lit up freely – whether it was a cigarette, a pipe or a fine cigar. Was there a Cuban cigar in the room? Who could say? Who would say?[21]

  Secretary Simmons moved to the head of the conference table and seated himself next to Thomas Turin, President of the New York Fed. Turin nodded to Simmons, and then struck his gavel to the pad in front of him. “This meeting will come to order,” he announced. He waited and watched as the voices diminished. “This meeting will come to order!” he announced again.

  The room became quiet.

  “Good morning gentlemen,” President Turin looked around the room at each man in turn. “Thank you for coming here today. I know that you're all busy and that it was a genuine sacrifice to break away from your work, especially during this crisis.”

  “Please welcome Mr. Pete Simmons, U.S. Secretary of the Treasury.”

  Simmons stood and nodded. “Thank you very much, Mr. Turin.”

  Simmons continued. “Gentlemen. I'll get right to the point.” He turned his head, making eye contact with each man in the room. “Lehman Bros. is, ah – experiencing 'difficulty', gentlemen. And we, that is, myself and the U.S. government, are asking for your support during this, ah – difficult time.” He brought the palms of his hands together as he looked around the room. “Gentlemen, we are asking that each of you provide a 'contribution' for purchasing a part ownership in Lehman Bros.”

  The room became silent as Simmons looked around the room.

  Finally, a hand rose up near the far end of the table. “Mr. Diamond?”

  Mr. Diamond of AB Jorday rose. “Mr. Simmons. Given the severity of the present crisis, I must inform you that AB Jorday does not have sufficient resources to help at this time.”

  Simmons saw another hand go up. “Mr. Lankfein?”

  “Yes, Mr. Simmons. We, too, do not have sufficient resources to help with Lehman Bros.”

  Yet another hand went up. “Mr. Mathison?”

  “Yes Mr. Simmons. Does Lehman have a positive net worth?”

  With this question, the room became abuzz. Turin tapped his hammer on the pad. “Please bring the room to order,” he announced.

  Mr. Simmons looked chagrined. “We don't know Lehman's net worth.”

  And with that response, the room again became abuzz.

  Simmons spied another raised hand. “Mr. Vineman?” He shouted.

  The room quieted.

  “Yes, Mr. Simmons. I must say I can find no way to conjure up aid for Lehman if they have a negative net worth.”

  The room immediately became abuzz.

  Mr. Simmons held up his arms. “Please, gentlemen, please,” he shouted.

  The room became quiet.

  “Gentlemen, I quite understand your sentiments. I want to thank you for attending today. This meeting is adjourned.”

  As Simmons turned to talk with Turin, the men began filing out.

  * * *

  After the meeting ...

  “You didn't try very hard, did you?”

  “What do you mean?” Simmons' shoulders tightened – drawing inward.

  “What I mean is that you didn't try very hard to sell them on bailing out Lehman.”

  “That's correct. I didn't try very hard.” Simmons' face turned red. “You want to know why?”

  “Yeah. I'd love to know why.” Turin replied.

  “Because I hate that sonofabitch Lehman CEO!”

  “Huh? What did he ever do to you?”

  “I don't want to talk about it!”

  “Okay.”

  Simmons was silent and then he spat it out, “he fucked my wife – well, my ex-wife now!”

  “Huh?”

  “My wife and that sonofabitch were screwing around behind my back.”

  “So now you're going to screw him?” Turin replied.

  Simmons' voice was like venom. “You bet. He's going to take a bath in his own shit!”

  Simmons clenched his mouth, red faced and silent. And th
en he looked into Turin's eyes and erupted. “I don't give a shit if Lehman is never bailed out. I'd just as soon that sonofabitch rot in hell!”

  * * *

  Later, back in the Fed Chairman's inner sanctum ...

  Ethan's smile spread across his face. “It looks like it's working! All these years. All of this preparation. And now we see the fruits of our efforts – a crushing contraction in the world economy. And this contraction will be even better with Lehman out of the way!” He looked over at Pete. “That was a good play you made by letting Lehman die.”

  “Yeah. It was good,” Pete smiled. “So what's our strategy going forward?”

  “Well, we'll do what everyone wants us to do.” Ethan looked at Pete and smiled. “We'll inject liquidity[22] into the system and pump it up so all the banks remain solvent. And we'll use the American people's money to buy the junk assets from the banks.”

  Ethan smirked, and then he said, “You just watch – the media will report it like a soap opera. They'll say 'the Fed is coming to the rescue!' And, voilà! We'll all look like heroes.” Ethan chortled.

  “And then?”

  “I think the next item is to get that bank bailout bill through Congress. That'll get the junk off the banks' balance sheets.”

  “Of course,” Pete chimed in, “we'll hang the tab on the American people.”

  “Yep. They're our own little money tree.” Ethan chortled yet again.

  Ethan rubbed his chin in thought. “And we also need to continue our international lending program so that we bail out those banks in Europe, the Middle East, and Central and South America. I've already given Tom the word – that he should fill every loan request no matter what its source.” Ethan paused and then continued. “And we should keep interest rates near zero. It will help the banks; but just as important, everyone will think we're doing something positive.” A nasty grin crossed Ethan's face. “Of course, the low interest rates will create a dollar carry trade and inflate a huge dollar bubble. And when the bubble bursts ...”[23]

  “But,” Pete injected, rubbing his chin, “won’t we need to use the ESF[24] slush fund?”

  “Naw,” Ethan replied. “We need to keep that for later – when things get really bad.”

  * * * * *

  The Chairman's intercom buzzed. “Yes, Carol.”

  “Sir, New York Fed President Simmons is on the line. He wants to talk with you.”

  “Thanks, Carol. I'll pick up.”

  The Chairman pushed a button on his speaker phone.

  “Pete. What's up?”

  Pete's voice was agitated. “I just got a call from Goldman.”

  “And?”

  “Well, if we let AIG go bankrupt, then there are several investment banks that will take huge losses – billions of dollars.”

  “Then I guess we'll have to fashion a bailout for AIG. How much do you think it will take?”

  “When it's all said and done, about $180 Billion.” Pete paused. “Can we do that?”

  “Sure. We'll just print up the money and give the tab to the American people.

  “But we'll have to keep it quiet. If the public finds out who's getting the money –”

  “No problem,” the Chairman interrupted. “We'll keep this info locked up tight. No one will know.”

  The Chairman paused and then spoke. “Anything else?”

  “No. That's all I was calling about.”

  “Then you have a great day, Pete. And thanks for the heads up.”

  “Bye.”

  Chapter 5 – September 29, 2008

  The Chairman's intercom buzzed. “Yes, Carol.”

  “Sir, Secretary Turin is here for your two o'clock.”

  “Thanks, Carol. Please ask him to come in.”

  It seemed like just a few seconds before the Secretary walked into the office. “How is your day, Ethan?”

  “Okay,” Ethan was slow to reply. “Any news?”

  Tom seated himself on the sofa.

  “Any news?” Ethan asked again.

  Tom sighed as he looked into Ethan's eyes. “Yes – there's news. Congress just voted it down.”

  “Shit!” Ethan spat out his anger. “We really need that bailout bill![25]“

  “I agree,” Tom replied in his soft voice. “And we need to do something about Congress.”

  Ethan's forehead crinkled. “I take it you have a plan?”

  “Yes. I've already called Matthew at our computerized trading partner. You know, the partner we don't advertise?” Tom Smiled. “Anyway, he's already agreed to drop the stock market through the remainder of today.” Tom tucked his hands behind his head and leaned back on the sofa. “By tonight, the market will be way down.”

  “How far are you going to drop it?”

  “I asked him to drop it 800 or so points. He said, 'no problem'.” Of course, I also suggested he should make a lot of money on it.”

  “Of course. But do you think it will work?”

  “Work?” Tom smirked. “Let me tell you. When those assholes in Congress see the meltdown of peoples' retirement funds, they'll pass this bill right away. Hell, they won't be able to bring it to the floor fast enough!”

  * * *

  8:30 am. Tim ran up the stairs, emerging on the sidewalk at ground level – at the 700 block of 7th Avenue. He was immediately assaulted by an ensemble of horns, jack hammers, cars, buses, trucks – the incessant noise of the city. I'm getting tired of the subway, he thought. Breathing deeply of the pollution, he strode down the sidewalk, passing one run-down store front after another. It was still early, and most of the stores still had bars locked across their fronts.

  Each store seemed to have its own set of loiterers – rude, fast-talking people with droopy jeans, droopy hats, earrings, and tattoos. They would just as likely smile at him as they would carve out his heart. I’m sure glad it’s daylight. It gets dangerous when night falls!

  In this town, no one cared if you crossed a street against traffic. Nor did anyone care if you crossed outside of a crosswalk. So Tim committed both sins, crossing the street at a diagonal against a green light. As he approached the building, he glanced up at the new sign. It read, simply, Barclays. Damn, he mused. They sure swapped out the old Lehman sign fast! He entered the building.

  His destination was L&J Brokerage – a smaller brokerage firm located near Times Square. He made his way up to the fourth floor and walked into the main trading area, dodging chairs in the aisle as he walked past some few traders already seated at their desks. He put his briefcase down and looked over to Lori's console – she was already here, busily typing away at her workstation.

  “What's the news?” He asked.

  “They hammered out an agreement for the bailout this past weekend. They finished it last night.”

  “I see where the Asian and European markets are already jumpy. When are they voting on it?”

  “Today,” she replied.

  “What time?”

  “This afternoon – early. They have four hours of debate and then they'll bring it to the floor.”

  “Any other news?”

  “Yeah. There's a bidding war for Wachovia – Citi and Wells are the bidders.”

  “God this looks like it's gonna be a long day.”

  “Yep,” Lori agreed.

  “Time to gas up!” Tim picked up his coffee cup and headed for the break room.

  * * *

  “... I'm sorry sir, but that’s the best price I can get. Yes sir – I understand, sir...” This was the standard refrain on the noisy chaotic trading floor, repeated again and again.

  The traders all heard it, and they all knew it. They simply couldn't get a good price when buyers were this scarce.

  Lori placed her hand over her headset mic and shouted to Tim. “I'm getting a lot of sell orders. How about you?” Lori shoved another bite of her turkey-lettuce sandwich down her throat.

  “Stocks down about 200 now,” Tim shouted back as he punched keys on his workstation. “And this is bef
ore the vote on the bailout bill has been taken. Wow – talk about pessimists!”

  The trading floor was awash in pandemonium. “Have you talked with your parents?” Lori shouted through the din.

  “Yep. I told 'em to get out of the stock market. Just pull everything out! How about you?”

  “I told 'em the same thing. I told 'em the near term outlook for the stock market is a steep and deep decline. For once, they took me seriously.”

  “So when are they selling their portfolio?” Tim asked.

  “Today, I think.”

  “Oh – wow. This is a bad time to sell!”

  “I know. But it is, what it is. They're really not too savvy on selling stock.”

  “Yeah. My parents are the same way,” Tim replied. “I just hope they're able to unload everything before it gets really bad.”

  “I don't know, Tim. It looks pretty bad right now!”

  * * *

  Tim worked furiously on the tsunami of incoming orders, his fingers moving deftly over the keyboard as he talked with each person on the other end of his headset. He focused on one person after another, one order at a time, as he blocked out the surrounding pandemonium and chaos.

  And then his fingers stopped. And he just stared at his computer screen.

  “Uh oh!” He shouted.

  Lori looked over at him as she continued typing. “What's up?”

  “It's just now coming over the wire. The bailout bill failed in the House vote.”

  “Oh shit!” And then she turned back to her computer screen. “There goes the market – the bottom just fell out!”

  She watched the moving tickers on her screen. “Hey! Check out the Treasury bonds. They're going through the roof!”

  She turned back to Tim. “I always knew that Treasury bonds were the ultimate safe investment, but I've never seen a move into Treasuries this huge.”

  “Did you notice that gold is staying even?” Tim asked.

  “Yeah. And considering there's a lot of unwinding leverage[26] with the down market, it’s rather amazing how it’s holding its own.”